UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-41276

SKYX PLATFORMS CORP.

(Exact name of registrant as specified in its charter)

Florida

46-3645414

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

2855 W. McNab Road

Pompano Beach, Florida 33069

(Address, including zip code, of principal executive offices)

(855)759-7584

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading symbol(s)		Name of each exchange on which registered
Common Stock, no par value per share		SKYX		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of May 3, 2023, the registrant had 87,067,734 shares of common stock, no par value per share, issued and outstanding.

SKYX PLATFORMS CORP.

Form 10-Q

TABLE OF CONTENTS

	PART I. FINANCIAL INFORMATION

	Cautionary Note Regarding Forward Looking Statements

Item 1	Financial Statements	4
	Consolidated Balance Sheets	4
	Consolidated Statements of Operations and Comprehensive Loss	5
	Consolidated Statements of Changes in Stockholders’ Equity (Deficit)	6
	Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4	Controls and Procedures	22
	PART II. OTHER INFORMATION
Item 1	Legal Proceedings	23
Item 1A	Risk Factors	23
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3	Defaults Upon Senior Securities	24
Item 4	Mine Safety Disclosures	24
Item 5	Other Information	24
Item 6	Exhibits	25

Signatures		26

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Form 10-Q”) of SKYX Platforms Corp. (the “Company,” “we,” “us,” or “our”) contains forward-looking statements that are based on management’s beliefs and assumptions and on information currently available to management. All statements other than statements of historical facts contained in this Form 10-Q, including statements regarding our strategy, future financial condition, future operations, projected costs, prospects, plans, objectives of management, outlook, and expected market growth, are forward-looking statements. In some cases, you can identify forward-looking statements by the following words: “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “aim,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” “target,” “seek” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements involve risks, uncertainties and other factors, many of which have been outcomes that are difficult to predict and may be outside our control, that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Forward-looking statements in this Form 10-Q include, but are not limited to, statements about:

	●	our ability to successfully launch, develop additional features and achieve market acceptance of our smart products and technologies, access and integrate our products and technologies with third-party platforms or technologies, respond to rapidly changing technology and customer demands, and compete in our industry;
	●	our ability to successfully integrate and manage the operations of Belami, Inc. (“Belami”) with our business;
	●	our ability to expand, operate and successfully manage our operations, including managing our business transformation in connection with evolving our business strategy to focus on smart products and technologies and integrating new lines of business;
	●	our ability to raise additional financing to support our operations as needed;
	●	our ability to comply with the terms of, and timely repay, our current debt financing;
	●	the impact of the COVID-19 pandemic on our business and operations, including the potential impact on manufacturing operations in China;
	●	our reliance on a limited number of third-party manufacturers and suppliers and our ability to successfully reduce our production costs;
	●	our potential dependence upon a limited number of customers and/or on contracts awarded through competitive bidding processes;
	●	any downturn in the cyclical industries in which our customers operate;
	●	our ability to acquire other businesses, license rights, form alliances or dispose of operations when desired;
	●	our ability to comply with regulations relating to applicable quality standards;
	●	our ability to maintain our license agreement with General Electric (“GE”);
	●	our ability to maintain, protect and enhance our intellectual property and retain rights to use intellectual property owned by third parties;
	●	the potential outcome of any legal proceedings;
	●	compliance with various tax laws and regulations, including income and sale tax;
	●	our ability to successfully sell and distribute our products and technologies;
	●	our ability to attract and retain key executives and qualified personnel;
	●	guidance provided by management, which may differ from our actual operating results;
	●	our ability to successfully manage our planned development and expansion, including the additional costs of being a public company;
	●	our ability to maintain effective internal control over financial reporting and disclosure controls and procedures;
	●	the potential impact of unstable market and economic conditions on our business, financial condition and stock price, including the effects of governmental regulations, geopolitical conflicts, including potentially deteriorating relationships with China, inflation, labor shortages, supply chain constraints and shortages, including availability of affordable electronic microchips, instability in the global banking system and the possibility of an economic recession;
	●	the potential impact of cybersecurity breaches or disruptions to our information systems, including our cloud-based infrastructure;
	●	the potential impact of natural disasters and other catastrophic events;
	●	risks related to ownership of our common stock; and
	●	the potential impact of anti-takeover and director and officer liability provisions in our charter documents and under Florida law.

These forward-looking statements represent our intentions, plans, expectations, assumptions, and beliefs about future events and are subject to risks, uncertainties, and other factors, including unpredictable or unanticipated factors that we have not discussed in this Form 10-Q. Investors should refer to the heading “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of other important factors, many of which are outside of our control, that may cause actual results to differ materially from those expressed or implied by the forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Form 10-Q will prove to be accurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. Considering the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. The forward-looking statements in this Form 10-Q represent our views as of the date of this Form 10-Q. We anticipate that subsequent events and developments will cause our views to change; however, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by U.S. federal securities laws. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Form 10-Q.

Part I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SKYX PLATFORMS CORP.

Consolidated Balance Sheets

	(Unaudited) March 31, 2023			(Audited) December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	14,521,818		$	6,720,543
Investments, available-for-sale		3,862,744			7,373,956
Inventory		2,102,320			1,923,540
Prepaid expenses and other assets		132,234			311,618
Total current assets		20,619,116			16,329,657

Other assets:
Furniture and equipment, net		193,856			215,998
Restricted cash		1,000,000			2,741,054
Restricted investments, available-for-sale		3,704,738			-
Right of use assets, net		22,584,674			23,045,293
Intangible assets, definite life, net		682,054			662,802
Other assets		407,191			182,306
Total other assets		28,572,513			26,847,453

Total Assets	$	49,191,629		$	43,177,110

Liabilities and Stockholders’ Equity (Deficit)

Current liabilities:
Accounts payable and accrued expenses	$	2,084,450		$	1,949,823
Notes payable, current		401,682			405,931
Operating lease liabilities, current		1,631,694			1,130,624
Royalty obligation		2,638,000			2,638,000
Convertible notes, current-related parties		950,000			950,000
Convertible notes, current		350,000			350,000
Total current liabilities		8,055,826			7,424,378

Long term liabilities:
Notes payable		5,133,916			4,867,004
Operating lease liabilities		22,330,469			22,758,496
Convertible notes, net		4,923,281			-

Total long-term liabilities		32,387,666			27,625,500

Total liabilities		40,443,492			35,049,878

Commitments and Contingent Liabilities:		-
Redeemable preferred stock - subject to redemption: $0 par value; 20,000,000 shares authorized; 880,400 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		220,099			220,099

Stockholders’ Equity (Deficit):
Common stock and additional paid-in-capital: $0 par value, 500,000,000 shares authorized; and 83,189,729 and 82,907,541shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		122,573,318			114,039,638
Accumulated deficit		(114,040,627	)		(106,070,358	)
Accumulated other comprehensive loss		(4,653	)		(62,147	)
Total stockholders’ equity (deficit)		8,528,038			7,907,133
Non-controlling interest		—			-
Total equity (deficit)		8,528,038			7,907,133

Total Liabilities and Stockholders’ Equity (Deficit)	$	49,191,629		$	43,177,110

The accompanying notes are an integral part of the unaudited consolidated financial statements.

SKYX Platforms Corp.

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

	2023			2022
	For the three months ended March 31,
	2023			2022
Revenue	$	10,025		$	6,971
Cost of revenues		(1,468	)		(5,640	)
Gross income		8,557			1,331
Selling, general and administrative expenses		(7,248,205	)		(11,947,440	)
Loss from operations		(7,239,648	)		(11,946,109	)
Other income / (expense)
Interest expense, net		(730,621	)		(90,505	)
Other income, loan forgiveness		—			178,250

Total other income (expense), net		(730,621	)		87,745
Net loss		(7,970,269	)		(11,858,364	)
Common stock issued pursuant to antidilutive provisions		—			(4,691,022	)
Preferred dividends		—			(21,232	)
Non-controlling interest					(35,442	)
Net loss attributed to common shareholders	$	(7,970,269	)	$	(16,606,060	)
Unrealized gain on debt securities		57,494			—
Net Comprehensive loss attributed to common stockholders	$	(7,912,775	)	$	(16,606,060	)

Net loss per share - basic and diluted	$	(0.10	)	$	(0.23	)

Weighted average number of common shares outstanding during the period – basic and diluted		82,965,182			72,818,108

The accompanying notes are an integral part of the unaudited consolidated financial statements.

SKYX Platforms Corp.

Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited)

	2023			2022
	For the three months ended March 31,
	2023			2022

Shares of Common stock
Balance, beginning of period		82,907,541			66,295,288
Common stock issued pursuant to offerings		—			1,650,000
Common stock issued pursuant to services		282,188			448,409
Common stock issued pursuant to conversion of preferred stock		—			9,976,536
Common stock issued pursuant to exercise of options		—			200,000
Common stock issued pursuant to cashless exercise of warrants		—			311,750
Common stock issued pursuant to antidilutive provisions		—			335,073
Balance, end of period		83,189,729			79,217,056

Common stock and paid-in capital
Balance, beginning of period	$	114,039,638		$	70,880,386
Common stock issued pursuant to offerings		—			20,552,000
Common stock issued pursuant to services		—			5,717,010
Common stock issued pursuant to conversion of preferred stock		—			2,494,134
Stock-based compensation		2,963,702			3,050,883
Common stock issued pursuant to exercise of options		—			210,000

Debt discount		5,569,978			—
Common stock issued pursuant to antidilutive provisions		—			4,691,022
Balance, end of period		122,573,318			107,595,436

Accumulated Deficit
Balance, beginning of period	$	(106,070,358	)	$	(74,269,898	)
Net loss		(7,970,269	)		(11,858,364	)
Non-controlling interest		—			(35,442	)
Common stock issued pursuant to antidilutive provisions		—			(4,691,022	)
Preferred Dividends		—			(21,232	)
Balance, end of period		(114,040,627	)		(90,875,958	)

Accumulated other comprehensive loss
Balance, beginning of period		(62,147	)		—
Unrealized gain on debt securities		57,494			—
Balance, end of period		(4,653	)		—

Beginning balance		-			-
Net loss		-			-
Total stockholders’ Equity (Deficit)	$	8,528,038		$	16,719,478
Ending balance	$	8,528,038		$	16,719,478

The accompanying notes are an integral part of the unaudited consolidated financial statements.

SKYX Platforms Corp.

Consolidated Statements of Cash Flows

(Unaudited)

	2023			2022
	For the three months ended March 31,
	2023			2022
Cash flows from operating activities:
Net loss	$	(7,970,269	)	$	(11,858,364	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		497,373			21,900
(Other income), loan forgiveness		—			(178,250	)
Amortization of debt discount		143,257			—
Non-cash equity-based compensation expense		2,963,702			8,767,894
Change in operating assets and liabilities:
Inventory		(178,780	)		—
Prepaid expenses and other assets		(45,501	)		(1,395,366	)
Operating lease liabilities		(171,963	)		—
Accretion operating lease liabilities		245,009			—
Royalty obligation		—			(300,000	)
Accounts payable and accrued expenses		398,183			1,583,700

Net cash used in operating activities		(4,118,988	)		(3,358,486	)
Cash flows from investing activities:
Investments, available-for-sale		(136,033	)		—
Purchase of property and equipment		(306	)		(191,034	)
Payment of patent costs		(33,559	)		(48,544	)
Net cash used in investing activities		(169,898	)		(239,578	)

Cash flows from financing activities:
Proceeds from common stock issuance		—			23,100,000
Placement cost		—			(2,548,000	)
Proceeds from exercise of options		—			210,000
Proceeds from issuance of convertible notes		10,350,000			—
Dividends paid		—			(21,232	)
Principal repayments of notes payable		(893	)		(839	)
Net cash provided by financing activities		10,349,107			20,739,929

Increase in cash, cash equivalents and restricted cash		6,060,221			17,141,865
Cash, cash equivalents, and restricted cash at beginning of period		9,461,597			10,426,249
Cash, cash equivalents and restricted cash at end of period	$	15,521,818		$	27,568,114
Supplementary disclosure of non-cash financing activities:
Preferred stock conversion to common	$	—		$	2,494,134
Common stock issued pursuant to antidilutive provisions		—			4,691,022
Debt discount		5,569,978			—
Cash paid during the period for:
Interest	$	711,648		$	90,630

The accompanying notes are an integral part of the unaudited consolidated financial statements.

SKYX Platforms Corp.

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1 ORGANIZATION AND NATURE OF OPERATIONS

SKYX Platforms Corp., a corporation (the “Company”), was incorporated in Florida in May 2004.

The Company maintains offices in Johns Creek, Georgia, Miami and Pompano Beach, Florida, New York City, and Guangdong Province, China.

The Company has a series of advanced-safe smart platform technologies. The Company’s first-generation technologies enable light fixtures, ceiling fans and other electrically wired products to be installed safely and plugged-in into a ceiling’s electrical outlet box within seconds, and without the need to touch hazardous wires. The plug and play technology method is a universal power-plug device that has a matching receptacle that is simply connected to the electrical outlet box on the ceiling, enabling a safe and quick plug and play installation of light fixtures and ceiling fans in just seconds. The plug and play power-plug technology eliminates the need of touching hazardous electrical wires while installing light fixtures, ceiling fans and other hard wired electrical products. In recent years the Company has expanded the capabilities of its power-plug product, to include advanced safe and quick universal installation methods, as well as advanced smart capabilities. The smart features include control of light fixtures and ceiling fans by the SkyHome App, through WIFI, Bluetooth Low Energy and voice control. It allows scheduling, energy savings eco mode, dimming, back-up emergency light, night light, light color changing and much more. The Company’s second-generation technology is an all-in-one safe and smart advanced platform that is designed to enhance all-around safety and lifestyle of homes and other buildings.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The consolidated financial statements as of March 31, 2023 and for the three months ended March 31, 2023 and 2022 are unaudited. The results of operations for the interim periods are not necessarily indicative of the results of operations for the respective fiscal years. The consolidated statement of financial condition at December 31, 2022 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statement presentation. The accompanying consolidated financial information should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for additional disclosures and accounting policies.

Reclassifications

For comparability, reclassifications of certain prior-year balances were made to conform with current-year presentations, such as certain expenses previously included in cost of revenues and reclassified as sales, general, and administrative expenses in 2022.

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid securities with original maturities of three months or less when acquired, to be cash equivalents. At March 31, 2023 and December 31, 2022, the Company’s cash composition was follows:

	March 31, 2023		December 31, 2022
Cash and cash equivalents	$	14,521,818	$	6,720,543
Restricted cash		1,000,000		2,741,054
Total cash, cash equivalents and restricted cash	$	15,521,818	$	9,461,597

Restricted Assets

The Company issued a letter of credit of $2.7 million in September 2022 to use as collateral for certain obligations to one of its lessors. The letter of credit was issued by a financial institution and was secured by debt securities of $3.7 million as of March 31, 2023 and cash of $2.7 million as of December 31, 2022. Additionally, pursuant to the Company’s acquisition of Belami, Inc., the Company placed $1 million in an escrow account.

Inventory

Inventories are stated at the lower of cost, determined on the first-in, first-out (FIFO) method. Cost principally consists of the purchase price (adjusted for lower of cost or market), customs, duties, and freight. The Company periodically reviews historical sales activity to determine potentially obsolete items and evaluates the impact of any anticipated changes in future demand.

SCHEDULE OF INVENTORY

		March 31, 2023				December 31, 2022
Inventory, component parts		$	2,102,320			$	1,923,540

Loss Per Share

Basic net earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.

The Company uses the “treasury stock” method to determine whether there is a dilutive effect of outstanding convertible debt, option and warrant contracts. For the three months ended March 31, 2023 and 2022, the Company recognized net loss and a dilutive net loss, and the effect of considering any common stock equivalents would have been antidilutive for the period. Therefore, a separate computation of diluted earnings (loss) per share is not presented for the periods presented.

The Company had the following anti-dilutive common stock equivalents at March 31, 2023 and 2022:

SCHEDULE OF EARNING (LOSS) PER SHARE

	March 31, 2023		March 31, 2022
Stock Warrants		2,063,522		1,079,985
Stock Options		33,114,250		32,711,682
Convertible Notes		3,536,668		86,668
Preferred stock		880,400		3,280,400
Total		39,594,840		37,158,645

Recently Issued Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on its consolidated financial statements.

NOTE 3 DEBT SECURITIES

The components of investments as of March 31, 2023 were as follows:

SCHEDULE OF COMPONENTS OF INVESTMENTS

	Fair value level		Cost		Unrealized loss			Carrying value

Corporate debt securities		Level 1	$	3,732,698	$	(1,752	)	$	3,730,946
State and local government debt securities		Level 1		908,354		(988	)		907,366
State and local government debt securities		Level 2		2,931,083		(1,913	)		2,929,170

Total			$	7,572,135	$	(4,653	)	$	7,567,482

NOTE 4 FURNITURE AND EQUIPMENT

Furniture and equipment consisted of the following:

SCHEDULE OF FURNITURE AND EQUIPMENT

	March 31, 2023			December 31, 2022
Machinery and equipment	$	67,419		$	67,419
Computer equipment		6,846			6,846
Furniture and fixtures		36,059			36,059
Tooling and production		534,204			534,204
Leasehold improvements		30,553			30,553
Total		675,081			675,081
Less: accumulated depreciation		(481,224	)		(459,083	)
Total, net	$	193,856		$	215,998

Depreciation expense amounted to $22,141 and $9,505 for the three months ended March 31, 2023 and 2022, respectively.

NOTE 5 INTANGIBLE ASSETS

Intangible assets consisted of the following:

SCHEDULE OF INTANGIBLE ASSETS

	March 31, 2023			December 31, 2022
Patents	$	857,931		$	824,372
Trademark		45,450			45,450
Finite lived intangible assets, gross
Less: accumulated amortization		(221,327	)		(207,020	)
Total, net	$	682,054		$	662,802

Amortization expense on intangible assets was $14,307 and $12,395 for the three months ended March 31, 2023 and 2022, respectively.

The following table sets forth the estimated amortization expense for future periods:

Remainder of 2023			39,925
2024			53,274
2025			53,274
2026			53,274
2027			54,573

NOTE 6 DEBT

The following table presents the details of the principal outstanding:

SCHEDULE OF DEBT TABLE

	March 31, 2023			December 31, 2022		APR at March 31, 2023			Maturity		Collateral
Notes payable ^(a)	$	5,157,792		$	5,115,000		8.00	%		September 2026		Substantially all Company assets
Convertible Notes ^(b)		11,650,000			1,300,000		6.00-10.00	%		September 2023-March 2026		Substantially all Company assets
PPP Loans ^(c)		6,995			7,835		1.00	%		April 2025		-
Economic Impact Disaster loan		149,157			150,000		3.75	%		November 2052		Substantially all Company assets
Total	$	16,963,944		$	6,572,935

Unamortized debt discount	$	(5,426,719	)	$	-

Debt, net of Unamortized debt Discount	$	11,537,225		$	6,572,935

	For the three-month period ended March 31,
	2023		2022
Interest expense associated with debt		326,742		90,630

As of March 31, 2023, the expected future principal payments for the Company’s debt are due as follows:

SCHEDULE OF FUTURE PRINCIPAL PAYMENTS


Remainder of 2023		1,705,931
2024		1,736,146
2025		1,734,021
2026		11,650,495
2027 and thereafter		137,351
Total	$	16,963,944

	(a)	The unpaid principal bears annual interest at the Wall Street Journal prime rate plus 1.75% per year.
	(b)	Included in Convertible Notes are loans provided to the Company from two directors, an officer and two investors. The notes each have the following terms: three-year subordinated convertible promissory note of principal face amounts. Subject to other customary terms, the Convertible Notes mature between September 2023 and January 2024 and bear interest at an annual rate of 6%, which is payable annually in cash or common stock, at the holder’s discretion. At any time after issuance and prior to or on the maturity date, the note is convertible at the option of the holder into shares of common stock at a conversion price of $15 per share.

		All convertible notes are convertible at a price ranging between $3 and $15 per share.

		During the three-month period ended March 31, 2023, the Company issued convertible promissory notes for $10.4 million. As an inducement to enter into the transactions, the Company issued 1,391,667 warrants to the note holders at an initial exercise price of $3 per warrant. The Company recorded a debt discount aggregating $5.6 million which was recognized as debt discount and additional paid-in capital in the accompanying balance sheet. The Company recognized $143,257 as amortized debt discount during the three-month ended March 31, 2023 and it is reflected as interest expense in the accompanying unaudited consolidated statement of operations.

	(c)	The Small Business Administration forgave approximately $178,000 of PPP loans during the three-month period ended March 31, 2022, which was recognized as other income.

NOTE 7 OPERATING LEASE LIABILITIES

In April 2022, the Company entered into a 58-month lease related to certain office and showroom space pursuant to a sublease that expires in February 2027. The Company recognized a right-of-use asset and a liability of $1,428,764 pursuant to this lease.

In September 2022, the Company entered into a 124-month lease related to its future headquarters offices and showrooms space. The Company recognized a right-of-use asset and a liability of $22,192,503 pursuant to such lease. In connection with the execution of lease, the Company was required to provide the landlord with a letter of credit in the amount of $2.7 million, which is secured by $3.7 million of debt securities.

The following table outlines the total lease cost for the Company’s operating leases as well as weighted average information for these leases as of March 31, 2023:

SCHEDULE OF LEASE COST OPERATING LEASE

	March 31, 2023
Lease costs:
Cash paid for operating lease liabilities	$	207,130
Right-of-use assets obtained in exchange for new operating lease obligations		22,584,674
Fixed rent payment	$	255,314
Lease – Depreciation expense	$	460,618

	March 31, 2023
Other information:
Weighted-average discount rate		6.41	%
Weighted-average remaining lease term (in months)		111


Minimum Lease obligation
Remainder of 2023	$	1,130,624
2024		1,780,875
2025		1,993,646
2026		2,223,207
2027 and thereafter		16,760,768
Total	$	23,889,120

NOTE 8 GE ROYALTY OBLIGATIONS

The Company has a license agreement with General Electric (“GE”) which provides, among other things, for rights to market certain of the Company’s products displaying the GE brand in consideration of royalty payments to GE. The Company cannot assign the agreement or sublicense the stated rights. The agreement imposes certain manufacturing and quality control conditions to continue to use the GE brand. The agreement expires in November 2023.

In the event the Company receives significant funding rounds of at least $50 million, the Company is required to use a portion of such funding to pay certain amounts to GE. The Company must make certain fixed and variable royalty payments through the terms of the agreement.

Variable royalty payments are due quarterly, using a December 1 – November 30 contract year and based upon the prior quarter’s sales. Royalty payments will be paid from sales of GE branded product subject to the following repayment schedule:

SCHEDULE OF ROYALTY OBLIGATIONS

Net Sales in Contract Year	Percentage of Contract Year Net Sales owed to GE
$0 to $50,000,000		7	%
$50,000,001 to $100,000,000		6	%
$100,000,000+		5	%

As of March 31, 2023 and December 31, 2022, the outstanding balance of the aggregate Minimum Payment was $2,638,000 and it is payable by December 31, 2023.

NOTE 9 ACCRUED EXPENSES

Accrued expenses consisted of the following:

SCHEDULE OF ACCRUED EXPENSES

	March 31, 2023		December 31, 2022
Accrued interest, convertible notes	$	219,972	$	104,735
Trade payables		1,271,535		1,369,702
Accrued compensation		458,316		475,417
Total	$	1,949,823	$	1,949,823

NOTE 10 RELATED PARTY TRANSACTIONS

Convertible Notes Due to Related Parties

Convertible notes due to related parties represent amounts provided to the Company from two directors and the Chief Executive Officer of the Company. The outstanding principal on the convertible promissory notes, associated with related parties was $950,000 as of March 31, 2023 and December 31, 2022 and accrued interest of $219,972 and $104,375, respectively.

Initial Public Offering

The Company issued 455,353 shares of its common stock to certain directors, officers and greater than 5% stockholders which generated gross proceeds of $6,374,942 during the three-month period ended March 31, 2022.

The Company issued 95,386 shares of its common stock to affiliates of certain directors and greater than 5% stockholders pursuant to certain anti-dilutive provisions during the three-month period ended March 31, 2022. The issuance of such shares was triggered based on the Company’s effective price of its initial public offering in February 2022.

NOTE 11 STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock

The Company issued the following common stock during the three months ended March 31, 2023 and 2022:

SCHEDULE OF COMMON STOCK

Transaction Type

Shares Issued

Valuation $

Range of Value
Per Share

2023 Equity Transactions

Common stock issued, pursuant to services provided

282,188

2,963,702

2.52 – 3.56

Transaction Type

Shares Issued

SEC Form 10-Q filed by SKYX Platforms Corp.